CAG ready to audit RIL's gas field expenses

"Comptroller and Auditor General (CAG) would be in a position to commence the audit in respect of the KG-D6 block from December 14, 2009," Minister of State for Petroleum and Natural Gas Jitin Prasada said in a written reply to a query in the Rajya Sabha here.

Besides RIL's KG-D6 block, CAG had also been asked to do a special audit of Cairn India's Rajasthan block and British energy firm BG Group-operated Panna/Mukta and Tapti fields.

"RIL has expressed willingness to provide all details and access to the records of KG-D6 to facilitate audit by CAG," he said. "CAG has received most of the initial documents from RIL."

Petroleum Ministry asked CAG to audit the accounts of RIL, which is facing allegations of gold-plating gas field costs that has increased four-fold to USD 8.8 billion. RIL had on August 17 agreed to an audit by the country's premier audit body.

Prasada said CAG would conduct audit of Production Sharing Contracts (PCS) in respect of the block KG-DWN-98/3 (KG-D6) awarded to RIL, for two financial years - 2006-07 and 2007-08, with access to records of previous years linked to transactions of these years.

Petroleum Ministry officials said they cannot immediately confirm if the audit by CAG has begun.

It is also understood that the scope of this audit will far exceed the normal course of audit by CAG and the prime objective may be to detect fraud, if any, by the operator (RIL) allegedly in collusion with oil regulator DGH and Ministry of Petroleum and Natural Gas.

It is expected that the audit may take several months to complete, the sources said.

CAG had earlier complained that it could not make any headway in the last two years in the absence of access to the books of private operators, including RIL.

While the ministry wanted special audit of accounts from 2003-04 fiscal, CAG wanted the scope of examination of records be restricted to 2006-07 and 2007-08 only.

The government in 2002 asked CAG to audit PSCs like the one for KG-D6 block with RIL, but the premier auditor had then stated that its charter neither permitted audit of private accounts nor did it have the manpower to do so.

Subsequently, the government with the concurrence of CAG, appointed independent third-party auditors on the basis of an open bidding process. These auditors have audited accounts of companies like RIL.

However, in 2007, CAG was asked to audit the exploration spending and the agency conducted audit of all the private company reports, copies of which were available with the DGH. To close the audit, they needed to seek originals, which would now be made available to them, they said.